Textual Analysis of Banks' Pillar 3 Documents

46 Pages Posted: 2 May 2019

See all articles by Minyue Dong

Minyue Dong

University of Lausanne - Faculty of Business and Economics (HEC Lausanne)

Eric Jondeau

University of Lausanne - Faculty of Business and Economics (HEC Lausanne); Swiss Finance Institute

Michael Rockinger

University of Lausanne - School of Economics and Business Administration (HEC-Lausanne); Centre for Economic Policy Research (CEPR); Swiss Finance Institute

Date Written: January 28, 2019

Abstract

Using a sample of 188 European listed banks covering 2004 to 2016, we conduct textual analysis on banks' Pillar 3 reports and annual reports to showcase how banks formulate their regulatory reports. We first develop dictionaries relying on machine learning tools and its subfield of textual analysis. In addition, we construct measures of text complexity (FOG), text detail (Named Entity Recognition), and boilerplate. We validate our dictionaries by extracting numerous textual indices consisting of (1) sentiment scores, (2) measures of tone, (3) similarity of reports over time, and (4) similarity across banks. As an additional validation test, we examine how markets react to the textual difference in the Pillar 3 disclosure of riskiness and uncertainty, proxied by sense, tone, and preciseness.

Keywords: Sentiment analysis, NLP, Text analysis, Accounting, Financial institution, Bank, Pillar 3

JEL Classification: D82, D83, G14, G18, G30, M40, M41

Suggested Citation

Dong, Minyue and Jondeau, Eric and Rockinger, Georg Michael, Textual Analysis of Banks' Pillar 3 Documents (January 28, 2019). Available at SSRN: https://ssrn.com/abstract=3365005 or http://dx.doi.org/10.2139/ssrn.3365005

Minyue Dong (Contact Author)

University of Lausanne - Faculty of Business and Economics (HEC Lausanne) ( email )

Building Antropole 3022, HEC
Mail box No. 38
Lausanne-Dorigny, Vaud. 1015
Switzerland
(41) 21 6923367 (Phone)
(41) 21 6923305 (Fax)

Eric Jondeau

University of Lausanne - Faculty of Business and Economics (HEC Lausanne) ( email )

Extranef 232
Lausanne, 1012
Switzerland
+41 21 692 33 49 (Phone)

HOME PAGE: http://www.hec.unil.ch/ejondeau/

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Georg Michael Rockinger

University of Lausanne - School of Economics and Business Administration (HEC-Lausanne) ( email )

Unil Dorigny, Batiment Internef
Lausanne, 1015
Switzerland
+41 21 728 3348 (Phone)
+41+21 692 3435 (Fax)

HOME PAGE: http://www.hec.unil.ch/mrockinger

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

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